European Central Bank (ECB) Chief Economist Philip Lane warned about a double-sided risk of higher inflation for longer and an upcoming recession, in an interview with CNBC on Tuesday.

Key quotes

“With the uncertainty, we have to manage the two risks.” 

“On the one side, that could be forces that keep inflation higher than expected for longer. On the other side, we do have the risk of a slowdown in the economy, which would reduce inflationary pressure.”

“So it’s very much having a clear vision for the next couple of meetings, having an orientation to move away from the very low rates we’ve had for quite a few years, but also fully respecting the importance of being data-dependent. And to retain the optionality to respond to what we see, in the coming months.”

Market reaction

EUR/USD extends losses below 1.0500, trading currently at 1.0490, losing 0.26% on the day.